October 15, 2012

Along with vast improvements in material conditions capitalism’s dark side has created insatiable appetites, limitless monetization of contemporary life through privatization for-profit (hospitals, schools, prisons…) commodification and commercialization. Harvard political philosopher, Michael Sandel claims we have gone too far and calls for an informed public debate, a robust conversation on the moral limits of markets? Sandel argues that the left and right, the Democrats and Republicans have abandoned civic virtue, and have impoverished views of citizenship and community. Sandel does not suggest precise limits but invites discussions. Things that were once considered repugnant as marketable commodities, have become or are gradually becoming normalized: paying people to give an organ or blood or to submit to risky drug tests; the sale of naming rights in classrooms, for sports stadiums, etc; paying school children to read more or get good grades; the right of corporations to pollute the atmosphere; hiring mercenaries to fight wars or using private corporations in the U.S. military presence in Iraq; selling citizenship to immigrants; selling admission to elite universities.

Selected Timeline of Related Events in the Social History of Moral Limits of Markets

Barely begun, work in process. Please note that efforts are made to acknowledge sources but this is a blog post not an academic paper and there might be unintentional omissions. See webliography and bibliography.

2012-10-15 Roth received a Nobel Prize for his innovative exchange concept applied to kidney transplants. In a 2007 article he noted that his exchange concept may have been repugnant to some as it created a grey area in benefits from organ donations. Economists Alvin E. Roth of Harvard University and Lloyd S. Shapley of the University of California at Los Angeles whose work has led to nearly 2,000 kidney transplants across the United States have received 2012 Nobel Prize for economics Monday at a news conference in Stockholm, Sweden. Roth and Shapley were honored for “the theory of stable allocations and the practice of market design.” (Smith 2012-10-15 ” Nobel economists’ big impact: Kidney transplants ). See also Roth, Alvin E. 2007. “Repugnance as a Constraint on Markets.” Journal of Economic Perspectives. Summer: 21:3. pp. 37–58.

2012-07-12 In a book review entitled “Money and the markets: Insatiable longing,” The Economistexaminedlimits of capitalism.

2012-04-24 Michael J. Sandel’s book entitled What Money Can’t Buy: The Moral Limits of Markets was published. Sandel asks, “Should we pay children to read books or to get good grades? Should we allow corporations to pay for the right to pollute the atmosphere? What about hiring mercenaries to fight our wars? Auctioning admission to elite universities? Selling citizenship to immigrants willing to pay? (Amazon)”

2007 “The laws against buying or selling kidneys reflect a reasonably widespread repugnance, and this repugnance may make it difficult for arguments that focus only on the gains from trade to make headway in changing these laws. That does not mean that no gains from exchange can be realized; in fact some gains are beginning to be realized in the kidney exchange programs that Tayfun So¨nmez, UtkuU¨ nver, and I helped to design in New England and elsewhere. In the simplest form of kidney exchange, a patient with a willing donor who has an incompatible blood type (or who is incompatible for another reason) can exchange a kidney with another such incompatible patient–donor pair. (That is, the pairs are matched so that the donor from one pair is compatible with the patient from the other, and each patient receives a kidney from the other patient’s donor.) This sort of “in kind” exchange has gained acceptance in the transplant community (Roth, Alvin E. 2007. “Repugnance as a Constraint on Markets.” Journal of Economic Perspectives. Summer: 21:3. pp. 37–58.).1″

2005-02-09 Michael J. Sandel presented his paper entitled the “The Moral Limits of Markets” in which he raised these questions: “Are there some things that should not be bought and sold, and, if so, why? The proliferation of markets in recent years makes this issue difficult to avoid. Consider, for example, recent proposals to establish markets in organs for transplantation, the race among medical entrepreneurs to patent human genes and other life forms, the aggressive marketing of drugs as consumer goods, and the proliferation of for-profit schools, hospitals, and prisons. The rampant commodification, commercialization, and privatization of contemporary life give us reason to reconsider the moral limits of markets: Are there some things that money should not buy?” (Hoffmann and Sandel 2005-02-09).

2003-07 [T]he U.S. Department of Defense included terrorist attacks or terrorism futures market in a speculative list of predictive markets. Public repugnance forced the Pentagon to hastily cancel the program (wiki).

1996 Michael J. Sandel’s book entitled Democracy’s Discontent was published. In it Sandel called for a rejuvenation of civic life and civic voice in the United States. He argued that the vision of citizenship and community shared by both Democrats and Republicans was impoverished ( Amazon).

1990 “[T]he Clean Air Act was amended to allow trading of rights to pollute through tradable emissions entitlements (Roth 2007).”

1907 George Simmel’s book on economic sociology entitledThe Philosophy of Money was published. Simmel investigated the consequences as money penetrated everyday life. “Hannes Böhringer has argued, “Money…objectifies the ‘style of life’, forces metropolitan people into ‘objectivity’, ‘indifference’, ‘intellectuality’, ‘lack of character’, ‘lack of quality’. Money socializes human beings as strangers…money also transforms human beings into res absolutae, into objects. Simmel’s student, Georg Lukács, correctly noticed that this objectification (in his words: reification and alienation) did not remain external, cannot, as Simmel maintained, be the ‘gatekeeper of the innermost elements’, but rather itself becomes internalized (H.Böhringer, ‘Die “Philosophie des Geldes” als ästhetische Theorie’, in H.J.Dahme and O.Rammstedt (eds), Georg Simmel und die Moderne, Frankfurt, Suhrkamp, 1984, pp. 178–82, esp. p. 182. cited in Simmel, Georg. 2004 [1907]. The Philosophy of Money. Third enlarged edition. Ed. David Frisby. Trans. Tom Bottomore and David Frisby from a first draft by Kaethe Mengelberg. London and New York.)” Roth ( 2007) cited Simmel (1907 as a starting point in sociology literature on “how the introduction of money changes many kinds of social relationships and their meanings.”

Who’s Who?

Michael J. Sandel “is professor of government at Harvard University, where he has taught political philosophy in the Faculty of Arts and Sciences since 1980. He was educated at Brandeis University and received his Ph.D. from Balliol College, Oxford University, where he was a Rhodes Scholar. He is a member of the National Constitution Center Advisory Panel, the Rhodes Scholarship Committee of Selection, the Shalom Hartman Institute of Jewish Philosophy, and the Council on Foreign Relations. He has received fellowships from the Ford Foundation, the American Council of Learned Societies, and the National Endowment for the Humanities. He is the author, most recently, of Democracy’s Discontent: America in Search of a Public Philosophy (1996), as well as Liberalism and Its Critics (1984) and Liberalism and the Limits of Justice (1982) (Tanner Lectures Introduction. 1998-05-11/12. “What Money Can’t Buy: The Moral Limits of Markets).” While at Balliol College, Oxford, as a Rhodes Scholar, Sandel studied under political philosopher Charles Taylor.
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June 19, 2011

There is a high degree of uncertainty in predicting future commodity prices that baffles those engaged in monetary policies, academics, economists, and the everyday consumer.

High frequency trading (see Direct Edge 2005-) using proprietary algorithmic trading programs accounted for over 25% of all shares traded by the buy side by 2009. In 2009 73% of US equity trading volume was attributed to the activities of a small number of high-frequency trading firms, including divisions of Goldman Sachs and UBS but many more obscure, startup firms (with only 12-100 employees) such as Archelon, EWT Trading, Getco and Peak6 (Heires, Katherine. 2009-07-20Code Green: Goldman Sachs & UBS Cases Heighten Need to Keep Valuable Digital Assets From Walking Out The Door. Millions in Trading Profits May Depend On ItSecurities Industry News). The entire event/analysis/action cycle has been reduced for traders with the fastest machines to a few milliseconds. Fast computing not rational decision-making counts. Arnuk and Saluzzi (2009) call these activities toxic trade and claim that the high frequency trader seize the best deals at the expense of real investors whose machines are not as fast.

There is a saturation of equity quotes with the entire event/analysis/action cycle has been reduced for some traders to a few milliseconds.

CQS Capacity (Quotes per Second) capacity was increased was increased by 33% to 1 million quotes/second on July 4, 2010 and on July 5th there was a micro-burst of activity. July 5th was 33% more active than any trading day in history.] CQS is already planning to increase capacity an additional 25% in October 2011. How long before that limit is hit ? We think it will be hit the very next trading day. If 3 years ago someone told us that equity quote traffic rates for NYSE, AMEX and ARCA issues would exceed 1 Million/second (not even counting Nasdaq stocks), we would have thought the market would have entered the greatest bull or bear market ever known. Instead, you can’t even recognize from a 1 minute chart where these bursts of out-of-control quote traffic rates occur. And when they do occur, a significant percentage of those quotes will have already expired before they even leave the exchange network. At these rates of growth, we will no longer have a diversity of trading participants with accurate market data, and regulators will have no hope of ever piecing together what happened after the next disaster. It took the SEC five months just to assemble equity data to analyse the flash crash [of May 6, 2010]. When the next disaster strikes, they will have to contend with 5 to 10 times more data (“Equity Quote Saturation” Nanex).”

“The market itself creates events in the form of imbalances of supply and demand that could be of value to traders who are fast enough to respond to them. There is no doubt that being faster than others entails private advantage, but is it socially beneficial? The first mover in the case of fundamental news imposes costs on other traders, and high adverse selection costs could cause market failure. The fast traders that take advantage of market events could provide valuable liquidity to those seeking immediacy and hence enhance market quality, but could also step ahead of large orders in the book, thereby imposing costs on other liquidity providers (as described in the specialist context by Seppi (1997)) (Hasbrouck, Joel; Saar, Gideon. “Low-Latency Trading“. p. 1. Retrieved 18 July 2011).”

Canadian-born, Harvard-educated economist Dean of the University of Toronto’s Rotman School of Management, Roger L. Martin argued in his publication entitled Fixing the Game: How Runaway Expectations Broke the Economy, and How to Get Back to Reality (2011-05) “The mayhem in our capital markets is ultimately the unfortunate effect of tightly tying together two different markets: the real market and the expectations market.” In her article printed in The Atlantic Lane Wallace (2009-07-07) admired Martin’s use of an easy-to-understand football analogy to explain how flawed economic theories about compensation and investment contributed to the 2008 melt-down on Wall Street. I have been unable to find the original Financial Times article to which Wallace referred but Martin has used the example of the New England Patriots’ stellar 16-0 record in their 2007 winning streak in Fixing the Game (2011) and this section is posted on Huffington Post. In it Martin explained how MVP Quarterback Tom Brady, the head coach and the team’s superlative 2007 performance was perfect even in measurable “real” terms. He uses Brady’s real performance value as an analogy for real stock market values and real embodied customers. He contrasts this with the speculators’ expectations market based on the point spread. The Patriots’ performance for example was only mediocre because the Patriots covered the point spread only ten times. Martin explained that “In betting vernacular, a favored team covers the spread when it wins the game by more than the point spread. In this case, the point spread is the moral equivalent of the stock price, in that it captures the consensus expectations of all bettors (Huffington Post).” Martin argued that it is impossible to meet bettors’ expectations forever and expectations grow to unattainable levels in both football and the stock market. In “American capitalism, CEOs are compensated directly and explicitly on how they perform against the point spread; that is, against expectations (Martin 2011 cited in Huffington Post).” And CEOs increasingly focus on managing share price over the short run something that is easier to manipulate. Shareholders are better off however when the focus of their investment managers is on the long term, on increasing share price more or less forever. In this horse-race spread-covering betting scenario, the interests of shareholders and executives are not aligned.

In 2009 (Stiglitz Commission 2009).” warned that financial speculation exacerbated the mortgage meltdown, the phenomenal increase in the price of energy including oil. As the price of energy increases countries’ purchasing power decreased. “The transfer of income from those who suffered from these price increases to those who benefited weakened global aggregate demand and contributed to the global imbalances which played an important role in the crisis (Stiglitz Commission 2009).”

There are those who claim that perceptions not realities create oil prices (Dicker 2011:309). He argued that the illogical outcome of BP disaster (the decrease in the price of oil when the supply was less than demand) is another example of the way in which oil markets and prices are influenced by quick analysis of traders and investors looking to benefit from a well-placed bet not by legitimate changes in fundamental supply.

While gurus such as Bernstein (2000) argue that gambling is for anyone but speculation is for professionals, the chaos and unpredictability of the current global economy have been linked to a growing culture of gambling in futures trading rather than level-headed professionalism. Gamblers create risk simply by placing a bet; professional speculators “transfer risk from the hedgers to the speculators” and it therefore called risk management instead of gambling.

“It rained last night so the price of soy beans will be down today.” Although the basis of fundamental analysis in economics is supply and demand, the actual fundamental analysis of specific markets that might generate accurate price predictions are complicated as numbers of factors overlap and massive quantities of data need to be considered. The simple equation involves how much of a commodity or service are buyers willing to pay at a given time and place. There used to be a correlation between price and consumption. Factors that impact on price of commodities include the state of the economy (local, regional, national and international – inflationary, recessionary with rising or falling employment), availability of alternate products or services, storage possibilities, weather, seasonality, price cycles, price trends, government subsidies, political influences, protectionist attitudes, international tensions, fear of war, hoarding, stockpiling, demand for raw materials (sugar, petroleum, copper, platinum, coffee, cocoa), currency fluctuations, health of the economy, level of unemployment, housing starts. Most technical systems are not effective in making traders money.

In examining implications regarding monetary policies the US Federal Reserve Board theoretical analyses often focus on: “commodity prices and inflation, the role of labor costs in the price-setting process, issues arising from the necessity of making policy in real time, and the determinants and effects of changes in inflation expectations (Bernanke 2008-06-09).”

While some argue that “policymakers care only about expected economic outcomes and not the uncertainty surrounding those outcomes” Pesenti and Groen claim that policymakers are concerned about the risks to their projections as well as the projections themselves (Pesenti and Groen 2011-03)?” Should and how does this affect the way in which policies are made?

Selected Timeline of Critical Events

2011-08-09. “In recent days, the high-frequency operation at Tradeworx Inc., a Red Bank, N.J. firm, juggled its largest daily volumes since its 2009 launch, resulting in some of its most profitable days on record, according to its founder, Manoj Narang. The reason: High-speed firms’ profits are highly correlated with increased volatility in the market. The more stock are rising and falling, the better they are able to make profits on the difference between buy and sell prices. A gauge of volatility, the Chicago Board Options Exchange Volatility Index, or VIX, rose more than 100% from Aug. 1 to Aug. 8. (Patterson, Scott. 2011-08-09. “High Frequency Traders Win in Market Bloodbath.” Wall Street Journal Blog Marketbeat.)”

2011-08-13 ANDREW ROSS SORKIN: “[T] he issue of what’s called high-frequency trading and electronic trading that she just mentioned is absolutely right. The reason why you’re seeing these huge gains and huge losses is because there are people who are making these decisions based on the headlines, but then there are computers, there’s machines that are effectively taking over and exacerbating the ups and the downs, because what they’re looking to do is — these are machines with algorithms that are looking to pick up pennies, lots of pennies in many instances. But they’re looking for one stock to go up and one stock to go down, and they see different correlations. And that’s really exacerbating the big moves in volatility we’re seeing in the stock market these days.” CATHERINE MANN: [The] ordinary investor, the person on Main Street is affected by these gyrations. [The ordinary investor] feels a disconnect between the big profits that some Wall Street, the big financials or non-financials companies get by trading on this high frequency and the ups and the downs, and the average person on Main Street. “The disconnect there has been there for a while. It’s been worsened because of the lack of credit being extended to Main Street, as — as — even though the banks have gotten better, in better shape, they have not extended any credit to Main Street. And so that disconnect is worse. And they really feel like Wall Street is out to get them. And they’re probably right about that (“Uncertainty, Computerized Trading Fuel Wall Street’s Wild Ride.”)

2011 High-frequency trading firms using high-frequency techniques (software-based mechanisms: high frequency algorithmic trading) earned $12.9 billion in profit in the last two years (2009-2011), according to TABB Group, a specialist on the markets.

2011-07-18 The price of gold climbed to c.”$1604 an ounce, putting the precious metal on track for a 10th-straight rise and another record settlement. The U.S. dollar strengthened against the euro but declined versus the yen. Crude-oil prices fell below $95 a barrel (Wall Street Journal).”

2011-07-10 Anderlini, Jamil. “Trade data show China economy slowing.” “In a sign that industrial activity in the country was moderating, imports of key commodities like crude oil, aluminium and iron ore all fell in June from a month earlier. Crude oil imports fell to the lowest level in eight months and were down 11.5 per cent from the same month a year earlier and, while copper imports rebounded in June, they were significantly down on 12 months ago.”

2011-07-04 “Speculators unburned.” The Economist. Oil traders are free to bid for it. And it seems they did. The Department for Energy says its auction was heavily oversubscribed with bids from more than 90 parties. For reference, there are 148 refineries in America, but most are owned by a few major players such as Exxon, who would do the actual bidding. Traders who anticipate the oil price will rise, and have the capacity to store oil, can buy physical stocks now, and sell oil forward. As long as the price rises enough to cover storage costs, they will turn a profit. If a trader was able to purchase West Texas Intermediate—the oil held in America’s Strategic Petroleum Reserve (SPR)—at the spot price on June 24th, they would already be sitting on a tidy profit.

2011-07-04 Capacity (Quotes per Second) CQS capacity was increased by 33% to 1 million quotes/second. On July 5th, 2011 there was a micro-burst of activity: 33% more active than any trading day in history (Nanex Research).

2011-06 “A recent report produced by a joint advisory committee of the SEC and the Commodity Futures Trading Commission urged the SEC to work with the Financial Industry Regulatory Authority and the exchanges “to develop effective testing of sponsoring broker-dealer risk management controls and supervisory procedures.The concern from Washington prompted a group of 12 brokerages to collaborate on a set of risk guidelines intended for adoption across the industry. Working under the aegis of FIX Protocol Limited, the group recently published a checklist of 13 risk controls it hopes will deter the acceptance of orders that might disrupt the marketplace. FIX Protocol is a pan-industry group that promotes and supports electronic trading through the ubiquitous FIX communications standard. The guidelines devised by the members of the FPL Risk Management Working Group focus strictly on algorithmic and direct-market-access orders for cash equities. The members include the nine largest trading firms, which account for the vast majority of industry orders (“New Checks Unlikely to Satisfy SEC.” Traders Magazine).”

2011-06-29

2011-06-28 “Futures advanced a second day as Brent crude oil climbed. Gasoline and heating oil rose as crude and equities gained and the dollar weakened against the euro.”(Powell 2011-06-28).

2011-06-23 In its commitment to keep oil markets well-supplied the Paris-based International Energy Agency (IEA) announced that the 28 IEA member countries for the third time in the IEA history, they would release 60 million barrels of oil (2 million barrels of oil per day from their emergency stocks over an initial period c. June-July 15) to offset the ongoing disruption of oil supplies from Libya. By May 30 132 mb of Libyan light, sweet crude oil was not available to the market and analysts expect this to continue through 2011. This supply disruption has been underway for some time and its effect has become more pronounced as it has continued. The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery (International Energy Agency 2011-06-23).

2011-06-16 Fletcher, Sam. “Energy prices tumble; Brent-WTI spread at 3-month low.” PennEnergy- Energy News. West Texas Intermediate to “the weakest level” since March, said Olivier Jakob at Petromatrix, Zug, Switzerland. In Houston, analysts at Raymond James & Associates Inc. said the European debt crisis and continued worries of a weakening US economy …

2011-06-15 Britain’s top banks will have to protect their retail business from investment banking activities (casino banking) after “the government backed a plan to overhaul the industry and shield taxpayers from future losses (more).” See Financial Times also.

2011 Megabank Barclays was ordered by the Financial Services Authority to pay a fine of £7m and to repay up to £60m to mainly elderly customers who had been duped into gambling their savings on the stock market. Read more

2011-06-17 In the Alberta oil sands, oil prices tripled from their 2009 lows. Drilling activity was on the upswing. Unemployment was falling and oilsands investment was surging (Read more)

“When you see oil prices spiking by $2, $3 or $5 a day, that’s not a situation Alberta wants to be in because it’s not driven by (market) fundamentals, it’s being driven by speculators”.

2011-05-02 through 2011-05-07 The price of silver dropped 25% in just four trading days.

2011-04 Investors pushed the price of silver up 57% in 2011 before a massive correction started on May 2, 2011.

2011-03 In the wake of the U.S. real estate collapse, declining returns in the bond market, worries about a global slowdown and fears that after a nice run, equities have nowhere to go but down, big hedge funds and other sophisticated market pros have been loading up on cotton, corn, soybean oil and other soft commodities. Milner, Brian.

2011-01-12 American International Group, which received a massive bailout in 2008, claimed it expected to complete a recapitalization that would allow it to fully pay back the government (more).

2011-02 Coffee prices: In New York, the benchmark May futures contract hit $2.784 a pound, their highest level since $3.40 in 1977, an all-time record. During the past 12 months alone, those prices rose by 145%. Last week the International Coffee Organisation said the price had hit a 14-year high. By July 2011 “Coffee futures are up 53% over the past year, although the front-month contract for July delivery fell 1.9%, or 4.8 cents, in Friday to close at $2.5255 a pound.”

2010-12 From 1977-2010 the compound annual sharehold value continues to decrease compared to pre-shareholder-value era (1933-1977) (Martin 2011 cited in Huffington Post).” Companies tend to boost earnings per share without creating value but gross-margin return on inventory investment drives longer term value creation. CEOs need to be held accountable for long-term performance by linking compensation to such metrics as multiyear stock performance. see Lek.

2010-09 Investment banker multimillionaire 59-year-old American Bob Diamond was appointed as head of Barclays megabank raising concerns that the Treasury should separate traditional retail banking from casino banking. Casino banking can lead to potential massive profits or loss depending on the level of risk of investments. Vince Cable: “Diamond, with his £20m bonuses, is the unacceptable face of this bonus-driven banking,” Oakeshott said. “This highlights the need to break-up and de-risk the British banking system.” Barclays appointment highlights ‘casino’ banking fears Business secretary says Barclays’ appointment of Bob Diamond illustrates dangers of having retail banks with massively profitable investment arms attached to them.

2010—08-16 The CFTC sanctioned ConAgra Trade Group, Inc. (CTG) $12 Million for causing a non-bona fide price to be reported in the NYMEX Crude Oil futures contract. On January 2, 2008, CTG was the first to purchase NYMEX crude oil futures contracts at the then-historic price of $100. As a result of CTG’s effort to be the first to trade at the $100 level, CTG caused a non-bona fide price to be reported, according to the CFTC order. (CFTC Press Release 5873-10, August 16, 2010) (more).

2010-07-21 President Obama signed the Dodd-Frank financial regulatory bill. “Title VII of the Dodd-Frank Act amends the Commodity Exchange Act to establish a comprehensive new regulatory framework for swaps and security-based swaps. The legislation is enacted to reduce risk, increase transparency, and promote market integrity within the financial system by, among other things: 1) providing for the registration and comprehensive regulation of swap dealers and major swap participants; 2) imposing clearing and trade execution requirements on standardized derivative products; 3) creating robust recordkeeping and real-time reporting regimes; and 4) enhancing the Commission’s rulemaking and enforcement authorities with respect to, among others, all registered entities and intermediaries subject to the Commission’s oversight. On the same day, the CFTC releases a list of 30 areas of rulemaking to implement the Dodd-Frank Act. (CFTC Press Releases 5855-10 and 5856-10, July 21, 2010) (more). The Dodd-Frank Act included the Volcker Rule which requires that “regulators implement regulations for banks, their affiliates and holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds. Non-bank financial institutions supervised by the Fed also have restrictions on proprietary trading and hedge fund and private equity investments. The Council will study and make recommendations on implementation to aid regulators (more).”

2010-05-24 A YouTube video of High Frequency Trading explained by William Arnuk, the 13-year-old son of Sal Arnuk, who works for the HFT research firm, Themis Trading.

2010-05 With the flow from BP’s Deepwater Horizon huge oil spill unstaunched both stock and oil markets crashed with the brunt of the losses in the energy sector. Oil prices fell. (Dicker 2011:305).

2010—05-06 Major stock indexes and stock index futures experience a “flash crash”, a brief but severe drop in prices, falling more than 5% in a matter of minutes, only to recover a short time later. Dow Jones industrials fell roughly 900 points, only to quickly recover. Some individual securities experience more volatility than the stock indexes. (Statement by SEC and CFTC, May 6, 2010). (more) The joint CFTC/SEC report on the “flash crash” of May 6, 2010, examined the role of high-frequency trading in this extreme episode (U. S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission, 2010). Whether or not a single large order caused the “flash crash” in May 2010, as the Securities and Exchange Commission has alleged that a single large order may have caused the crash and has placed pressure on brokers to make sure they don’t toss any oversize or out-of-control orders into the market (Traders Magazine). “The regulators’ official October report on the 15-minute plummet in the Dow Jones Industrial Average on May 6, 2010, blamed a liquidity crisis that followed a bad trade in S&P 500 futures. Officials have since taken action to prevent a similar catastrophe by instituting circuit breakers that halt individual stocks in the S&P 500 after a 10 percent move (Melloy 2011-07-07).”

2010—04-06 It took $20 trillion of public funds over a period of two-and-a-half years to lift the total world market capitalization of listed companies by $16.4 trillion. This means some $3.6 trillion, or 17.5%, had been burned up by transmission friction. Government intervention failed to produce a dollar-for-dollar break-even impact on battered markets, let alone generate any multiplier effect, which in normal times could be expected to be between nine and 11 times. In the meantime, with the exception of China’s, the real global economy continues to slide downward, with rising unemployment and underemployment. The massive government injection of new money managed to stabilize world equity markets by January 2010, but only at 73.5% of its peak value in October 2007. It still left the credit markets around the world dangerously anemic and the real economy operating on intensive care and life support measures from government. This is because the bailout and stimulus money failed to land on the demand side of the economy, which has been plagued by overcapacity fueled by inadequate workers’ income, masked by excessive debt, and by a drastic reversal of the wealtheffect on consumer demand from the bursting of the debt bubble. The bursting of the debt bubble destroyed the wealth it buoyed, but it left the debt that fueled the bubble standing as liability in the economy. Much of the new government money came from adding to the national debt, which taxpayers will have to pay back in future years. This money went to bail out distressed banks and financialinstitutions, which used it to profit from global “carry trade” speculation, as hot money that exploited interest rate arbitrage trades between economies. The toxic debts have remained in the global economy at face value, having only been transformed from private debts to public debts to prevent total collapse of the private sector. The debt bubble has been turned into a dense debt black hole of intense financial gravity the traps all light from appearing at the end of the recovery tunnel.(Lui, Henry C.K. 2010—04-06. “Bailouts, Stimulus Packages and Jobless Recovery: The Crisis of Wealth Destruction. Part I).”

2010-03 Michael Lewis published his book entitled The Big Short in which he returned “to his financial roots to excavate the crisis of 2007–2008, employing his trademark technique of casting a microcosmic lens on the personal histories of several Wall Street outsiders who were betting against the grain—to shed light on the macrocosmic tale of greed and fear.” “Lewis is a capable guide into the world of CDOs, subprime mortgages, head-in-the-sand investments, inflated egos–and the big short.” Lewis provides “a savvy assessment of the wisdom of the financial bailout and where-are-they-now updates on the book’s various heroes and villains.” (more)

2010—01-14 The “CFTC votes at an open meeting to publish in the Federal Register a proposal to set position limits for futures and option contracts in the major energy markets. (CFTC Press Release 5771-10, January 7, 2010) (more).”

2010-01 Organizations “representing the electric and natural gas industries and serving nearly all energy customers in the United States, support the goals of the Administration and Congress to improve transparency and reduce systemic risk in over-the-counter (OTC) derivatives markets. As the Senate considers financial reform legislation, [they argued] that it preserve the ability of companies to access critical OTC energy derivatives products and markets. engaged in off-market trading for oil which is unregulated. Estimates for the OTC derivative market for all assets range upward of $600 trillion. See (Edison Electric Institute (EEI). 2010-01. “OTC Derivatives Reform: Energy Sector Impacts.”).

2009-12-17 “Automated market makers (AMM) co-locate their servers in the NASDAQ or the NYSE building, right next to the exchanges’ servers. AMMs already have faster servers than most institutional and retail investors. But because they are co-located, their servers
can react even faster.” “According to Traders Magazine the number of firms that co-locate at NASDAQ has doubled over the last year (Arnuk, Sal L.; Saluzzi, Joseph. 2009-12-17. “Toxic Equity Trading Order Flow on Wall Street: The Real Force Behind the Explosion in Volume and Volatility.” A Themis Trading LLC White Paper.)

2009-10-08 “High Frequency Trading Technology: a TABB Anthology.” TABB reported that software capable of electronic routing and execution based on algorithms account for more than 25% of all shares traded by the buy side today. A relatively few high frequency proprietary trading firms experienced a meteoric rise and now wield far greater influence on the markets today than most people recognize.

2009-10-30 Market analysts argued that oil markets were no longer tied to supply and demand fundamentals. They were concerned with the extremely high correlation between crude oil prices and US currency (“Flood 2009-10-30).

2009-08-06 Computer-based algorithmic programs carry out transactions in 400 microseconds which is 1000 times faster than the human eye. Few ordinary investors are aware of or have access to this frenetic, technology-driven world of high-frequency trading which accounted for 50% of daily volume in US stocks, up from estimates of 30 per cent in 2005 (Mackenzie, Michael; Grant, Jeremy. 2009-08-06. “The dash to flash.” Financial Times.)

2009-06-28 Evans-Pritchard, Ambrose. “China’s banks are an accident waiting to happen to every one of us.
Fitch Ratings warned that China’s banks have lent up to $1,000bn (£600bn) since December 2008. “Money is leaking instead into Shanghai’s stock casino, or being used to keep bankrupt builders on life support.” This does not help the world economy.

2009-06-26 “The Iraq War and other events which helped set off an increase in the price of oil had a further depressing effect on countries which import energy, including the U.S. The magnitude of the increase in energy prices was exacerbated by financial speculation. This change in the price of energy, accompanied by governments’ attempts to develop alternative bio energy sources contributed to higher food prices. The sharp increase in energy prices thus directly and indirectly brought further reductions in purchasing power within many countries. The transfer of income from those who suffered from these price increases to those who benefited weakened global aggregate demand and contributed to the global imbalances which played an important role in the crisis (Stiglitz Commission 2009).”

2009-05 During “an annual conference of the Securities Industry and Financial Markets Association, top executives from Direct Edge and the NYSE angrily debated the merits of flash orders. Flash orders are a type of high frequency trading. Institutional paying participants get a flash peek at prices before they are released to the broader, public market (more).”

2009-03-24 The Federal Reserve, working closely with the Treasury, made the decision to lend to AIG on September 16, 2008. It was an extraordinary time. Global financial markets were experiencing unprecedented strains and a worldwide loss of confidence. Fannie Mae and Freddie Mac had been placed into conservatorship only two weeks earlier, and Lehman Brothers had filed for bankruptcy the day before. We were very concerned about a number of other major firms that were under intense stress. AIG’s financial condition had been deteriorating for some time, caused by actual and expected losses on subprime mortgage-backed securities and on credit default swaps that AIG’s Financial Products unit, AIG-FP, had written on mortgage-related securities. As confidence in the firm declined, and with efforts to find a private-sector solution unsuccessful, AIG faced severe liquidity pressures that threatened to force it imminently into bankruptcy (more). Claims of bondholders and counterparties were paid at 100 cents on the dollar by taxpayers, without giving taxpayers the rights to the future profits of these institutions. Benefits went to the banks while the taxpayers suffered the costs (more).

2009-02-03 The “U.S. government announced a restructuring of a bailout plan for the troubled insurer American International Group Inc. Monday, extending $30 billion in additional aid to the company. News of the additional funds came as AIG, once the world’s largest insurer, said it lost $61.7 billion in the fourth quarter, the biggest quarterly loss in U.S. corporate history, amid continued financial market turmoil.”

2008-10-18 The President of the United Nations General Assembly, “Miguel D’Escoto Brockmann, announced his intention to establish a taskforce of experts to review the workings of the global financial system, including major bodies such as the World Bank and the IMF, and to suggest steps to be taken by Member States to secure a more sustainable and just global economic order (http://www.un.org).” Noted economist and Kerala State Planning Board Vice-Chairman Prabhat Patnaik was included in a four-member high-power task force of the United Nations (U.N.) to recommend reforms of the global financial system. The task force Commission of Experts on Reforms of the International Monetary and Financial System (2009), informally known as the Stiglitz Commission, was headed by Nobel Prize-winning economist Joseph Stiglitz.

2008 Morgan Stanley and Goldman Sachs, the last two investment banks left standing, announced they would become traditional bank holding companies, marking the end of an era for Wall Street (more).

2008-09-16 American International Group, Inc. (AIG) (NYSE: AIG), an American insurance corporation, suffered a liquidity crisis following the downgrade of its credit rating. “The Federal Reserve, working closely with the Treasury, made the decision to lend to AIG on September 16, 2008. It was an extraordinary time. Global financial markets were experiencing unprecedented strains and a worldwide loss of confidence. Fannie Mae and Freddie Mac had been placed into conservatorship only two weeks earlier, and Lehman Brothers had filed for bankruptcy the day before. We were very concerned about a number of other major firms that were under intense stress. AIG’s financial condition had been deteriorating for some time, caused by actual and expected losses on subprime mortgage-backed securities and on credit default swaps that AIG’s Financial Products unit, AIG-FP, had written on mortgage-related securities. As confidence in the firm declined, and with efforts to find a private-sector solution unsuccessful, AIG faced severe liquidity pressures that threatened to force it imminently into bankruptcy (more).”

2008-06 Federal Reserve Chairman Bernanke “singled out the role of commodity prices among the main drivers of price dynamics, underscoring the importance for policy of both forecasting commodity price changes and understanding the factors that drive those changes (Pesenti and Groen 2011-03 citing Bernanke).”

2008-04 The macroeconomic outlook changed rapidly and dramatically as the global economy experienced the near-collapse of trade volumes and the associated plunge in commodity prices was the harbinger of pervasive disinflation risks (Pesenti and Groen 2011-03).

2008-06 “NYSE Floor Brokers Get New Tools.” The New York Stock Exchange introduced two new technologies to give brokers on the NYSE trading floor the ability to trade algorithmically and to strengthen the brokers’ ability to locate large sources of liquidity. more

2008-06-17 Ross Levin, a Wall Street NYC hedge fund analyst with Arbiter Partners, who calls himself a “passive speculator in securities” met Lionel Lepine, a member of the Athabaskan Chipewyan First Nation whose family and friends living on the contaminated watershed upriver from the oil sands’ effluence are suffering from unprecedented numbers of cancerous tumours. Levin attended Calgary’s prominent energy investment forum and “found himself in the eye of a growing environmental storm battering Alberta’s oilsands — one of several clashes centred on the energy sector.”read more | digg story

2008-04-02 – After two decades spent expanding in Britain, the United States and other developed economies, the world’s third biggest bank is shifting its ….. or if the government forces banks to separate their retail arms from investment banking, dubbed “casino banking” by some politicians. .

2008 Impatient development of nonrenewable resources in the oil sands.

2008-03-24 Reich, Robert B. 2008-03-24. Is the Game About to Stop? American consumers’ buying power was less than the goods and services the U.S. economy is capable of producing. Reich predicted fewer jobs, even less consumption which would lead to even fewer jobs and possible a recession which could become a full-fledged depression. Reich argued that fiscal and monetary policies could perhaps make up for consumers’ lack of buying power. American consumers were already deep in debt, their homes were losing value, their paychecks were shrinking.

2008 Meteoric rise of oil commodities market directly caused by irresponsible speculators playing with volatile, unpredictable hedge funds that play havoc with the market making a fortune for some while destroying economic, social and ecological environments all around them.

2008 Calgary has a high percentage of young millionaires with lots of disposable income. There are also c.4000 homeless people in Calgary, the oil capital of Canada. c. 40% of the homeless are working poor who are unable to afford housing.

2007-10-31 Meredith Whitney, an obscure analyst of financial firms for Oppenheimer Securities “predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend (Lewis, Michael. 2008. The End).”

2007-08 Arnuk and Saluzzi argued in their white paper entitled Toxic Equity Trading Order Flow on Wall Street: The Real Force Behind the Explosion in Volume and Volatility” (2009-12-17) that electronic trading, the new for-profit exchanges and ECNs, the NYSE Hybrid and the SEC’s Regulation NMS all came together in unexpected ways in the late summer of 2007. This perfect storm caused the Volatility Index, [stock market volatility index (VIX) “fear gauge” measures the expectation of price movement over the next 30 days. The higher the reading, the more likely stocks are to move in one direction or another] to climb, trading volumes to increase explosively, stock prices and indexes to experience rapid change. ”
This has resulted in the proliferation of a new generation of very profitable, high-speed, computerized trading firms and methods that are causing retail and institutional investors to chase artificial prices (Arnuk and Saluzzi 2009-12-17).”

2006-03-07 The merger of NYSE and Archipelago was completed forming the NYSE Group, Inc., a holding company that operates two securities exchanges: the NYSE and NYSE Arca, Inc. They are a leading provider of securities listing, trading and market data products and services (more).

2007-01 “Both the switch to trading in penny increments in January 2007 and stepped-up activity by high-frequency traders have cut into dealer profits. That has made the dealers less willing to shoulder the entire burden of supporting the exchanges. Almost 90 percent of industry volume is now being traded in options subject to the “penny pilot.” With the minimum trading increment down from 5 cents to 1 cent in the most active options, competition has cut dealer spreads dramatically. “Options Market Makers Catch a Break on Fees as Customers Pick Up.” Traders Magazine

2006 “[F]lash orders – a key focus of the New York Times article, which prompted an almost instant response from politicians and regulators. Flash orders first appeared in US equity markets in 2006, with the launch of the Enhanced Liquidity Provider (ELP) programme by Direct Edge. The idea was that if an order had been sent into Direct Edge and not found a match, it would be shown to other market participants before being routed out to alternative markets, as would normally happen. In theory, more of the orders placed with Direct Edge would be filled, and more customers would have a shot at trading at the price they want (Wood, Duncan. 2009-09-04) “Murky business.” Risk magazine.” tags: Algorithmic Trading Topics: Equities, Trading

2006-2008 Mainly cautious elderly customers were ill-advised by Barclays between 2006 and 2008 to put money into high-risk investments Aviva Global Balanced Income or the Aviva Global Cautious Income funds. No one at Barclays lost jobs even though this scandal cost Barclays shareholders close to £80 million and inflicted untold damage on Barclays’ reputation. Read more

2005-12-15 NYSE Hybrid Market was launched, creating a unique blend of floor-based auction and electronic trading. NYSE Hybrid Market claimed to provide customers with more choices and greater flexibility in accessing the superior liquidity and best prices of the NYSE marketplace. In 2005, the combined dollar value of transaction volumes of the NYSE and NYSE Arca represented approximately $17.8 trillion dollars, which was greater than the value of trading of Nasdaq ($10.1 trillion), the London Stock Exchange ($5.7 trillion), the Tokyo Stock Exchange ($4.4 trillion), Euronext ($2.9 trillion) and the Deutsche Börse ($1.9 trillion) (more)

2005-06-29 70 FR 37496, 37627 Rule 603 — Distribution, Consolidation, and Display of Information with Respect to Quotations for and Transactions in NMS Stocks. “In Regulation Fair Disclosure, the SEC took the stand that firms cannot release fundamental information to a subset of investors before others. On the other hand, Rule 603(a) established a different approach to market data, whereby market centers could sell data directly to subscribers, in effect creating a tiered system of investors with respect to access to information about market events. Rule 603(a) prohibits an SRO or a broker-dealer from supplying the data via direct feeds faster than it supplies it to the Securities Industry Automation Corporation (SIAC) that processes the data and distributes the “tape.” However, the operation of processing and retransmitting data via SIAC appears to add 5 to 10 millisecond and hence subscribers to direct exchange data feeds “see” the information before others who observe the tape (more).”

2005-07-31 CEO, John Thain discussed NYSE plans to merge its floor-based trading system with a relatively new electronic market known as Archipelago creating a hybrid system that allows electronic, instantaneous and anonymous trades. Thain’s former employer, Goldman Sachs, was on both sides of the deal representing the NYSE and Archipelago. Goldman was the biggest NYSE seat holder, owned a specialist firm and 15% of Archipelago “NYSE chief: Hybrid trading system’s the way to go.”

2005Many banks operated proprietary trading units that were organized much like hedge funds. Risk exposures of the hedge-fund industry began to have a material impact on the banking sector, resulting in new sources of systemic risks (more).

2005 Direct Edge, a small, electronic trading company opened for business using high-frequency trading (lightning-fast computers equipped with sophisticated and powerful algorithms that are capable of executing trading strategies) and flash orders (literally flashing their orders to their own investors for about a tenth of a second before releasing it to the public market).

2005 According to one study, if the share of world trade and world gross domestic product for non-industrial countries had remained at its 2000 levels, then by 2005, real oil prices would have been 40 percent lower, and real metals prices 10 percent lower, than they actually were (Pain, Koske, and Sollie, 2006). Since 2005, continued strong growth in the demands for resources of emerging market economies have likely put further considerable upward pressure on commodity prices (Bernanke 2008-06-09). ”

2004 The “demand for oil by members of the Organisation for Economic Co-Operation and Development (OECD) has been essentially flat since 2004 (Bernanke 2008-06-09). ”

2004-08-02 Revolutionary electronic trading practices transformed the stock market. The NYSE filed to expand using the NYSE Direct+® system. NYSE Direct+® eliminated limits on the size, timing, and types of orders that can be submitted via Direct+, significantly increasing the level of purely electronic trading at the NYSE.

2004 The “demand for oil by members of the Organisation for Economic Co-Operation and Development (OECD) has been essentially flat since 2004 (Bernanke 2008-06-09). ”

2003 The price of oil had remained relatively stable from 1990 to 2003 when the price of oil became volatile. The price increased sixfold in five years then lost 80% of its value in 6 months (Dicker 2011:viii).

2001 There was “an overnight change in the trading patterns of the Nasdaq 100 Index which highlighted the competitive impacts of the SEC reforms and foreshadowed the dominance of the high frequency traders and all-electronic marketplaces. At the time, the ETF for the Nasdaq 100 Index (then known as the QQQ) was the most actively traded security and was primarily traded on the American Stock Exchange which utilized a manual floor-based specialist system. Using ATSs, the high frequency traders began using their efficient automated trading systems to narrow the quoted spreads in the QQQ from several pennies down to tenths of a penny, saving investors millions in the process (Traders) .”

Within months, investors voted with their feet and made the electronic markets that featured the liquidity and narrower spreads of the high frequency traders the dominant venues for the QQQ. Investors never looked back. Ultimately, the NYSE and the Nasdaq Stock Market were compelled to purchase these electronic markets that catered to high frequency traders (Archipelago was purchased by the NYSE and INET by the Nasdaq Stock Market). The traditional, uncompetitive Wall Street market maker model was replaced and the exchanges were transformed to open, fair and transparent electronic marketplaces.

1998Security and Exchange Commission ruling allowed electronic communication networks (ECN’s for short) to trade equities in competition with the traditional exchanges. New technologies made the automation possible resulting in the development of high frequency trading: Lightening-quick computers, aided by powerful algorithms, buy and sell stocks based on price or other markers (more).

1998 Brooksley Born, chairman of the Commodity Futures Trading Commission declared that the unregulated regulation of private derivative contracts could “pose grave dangers to our economy.” He argued forcefully for regulation of private derivative contracts but lost to Alan Greenspan and Robert Rubin who were against policing the deals.

1986 The total volume of futures contracts trading was 184 million and the T bonds were among the most actively traded future contracts (Bernstein 2000:71).

1989 Michael Lewis’ novel entitled Liar’s Poker was published. He intended to write a period piece about the 1980s in America. He had expected readers to be outraged that in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million. He expected readers to be horrified that one of the traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million. He expected readers to be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running.” Writing in 2008 he expressed dismay that Wall Street continued for another 20 years and the public were more in awe than angry. Read more: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom#ixzz1Qd1u5MLZ

1987 The World Commission on Environment and Sustainable Development (Brundtland Commission) defined sustainable development as meeting the needs of the present without compromising the ability of future generations to meet their own needs.

1987-10-19 “The Dow Jones Industrial Average tumbled more than 20%, and the swoon extended into the following day, before a rebound. Floor traders, working by telephone, dominated the action and computer-generated trading was still in its infancy. Dark pools and high-frequency trading were the stuff of science fiction. Trading reached 600 million shares, according to the SEC (source).”

1982 Futures trading in the US was self-regulating and anyone in the business had to become a member of the National Futures Association (NFA).

1970s The Bretton Woods system broke down in the early 1970s. This was followed by a period of financial market liberalization and deregulation, by a surge of private capital flows and by the increasingly global reach of financial institutions.

1974 The US Congress passed the Commodity Futures Trading Commission Act and established Commodity Futures Trading Commission (CFTC) to protect participants in the futures market from fraud, deceit and abusive practices such as unfair trading practices (price manipulation, prearranged trading, trading ahead of a customer), credit and financial risks, and sales practice abuses (Bernstein 2000:32). Individual nation states have similar regulating bodies.

1973/4 The International Energy Agency (IEA) was founded as an autonomous organisation to ensure reliable, affordable and clean energy for its 28 member countries and beyond. The IEA’s initial role was to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets. The Executive Director in 2011 is Nobuo Tanaka “Total oil stocks in IEA member countries amount to over 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes. IEA net oil-importing countries have a legal obligation to hold emergency oil reserves equivalent to at least 90 days of net oil imports. These countries are holding stock levels well above this minimum amount, currently at 146 days of net imports (http://www.iea.org)”

1972 The total volume of futures contracts trading was 18 million and the top ten most actively traded future contracts were agricultural futures (Bernstein 2000:71).

1970s There was increasing volatility in international currency exchange rates as the Bretton Woods agreement began to break down. Business people transferred risk of volatility in international markets by hedging with speculators willing to take the risk. Futures markets began to expand into foreign currencies as fluctuated wildly competing against each other and the US dollar.

1960s Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1).

1960s Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1). These financial instruments offer unlimited profit potential with relatively little capital. Speculators are drawn to the possibility of quick money or what I like to call impatient money. The great wealth accumulated from speculative financial instruments has spawned careers in brokerage, market analysis, computerized trading, computer software and hardware, accounting, law, advertising which themselves subdivide into more recent opportunities such as those related to risk-management.

1929-30 “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.” Eccles, Marriner S. 1951. Beckoning frontiers: Public and personal recollections Ed. Hyman, Sidney. Alfred A. Knopf.

1848 The Chicago Board of Trade (CBOT) was formed as a price risk occurred in the grain markets of Chicago. It was a cash market for grain. Forward or “to-arrive” contracts began trading at the CBOT almost immediately.

1710 The first modern organized futures exchange began with the Dojima Rice Exchange in Osaka, Japan.The Japanese feudal landowners began to use certificates of receipt against future rice crops. As these futures certificates became financial instruments in the general economy the value of the certificates would rise and fall as the price of rice fluctuated. The Dojima Rice Exchange emerged as the world’s first futures market where speculators traded contracts for the future delivery of rice or “certificates of receipt.” The Japanese government outlawed the practice when futures contracts (where delivery never took place) began to have no relationship to the underlying cash value of the commodity leading to wild and unpredictable fluctuations (Bernstein 2000:30).

Actors and Actants

Electronic Communication Network (ECN) “An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over-the-counter market maker, and permits such orders to be entirely or partly executed.”

High-frequency trading firms (they self-identify as Automated Trading Professionals) use high-frequency techniques (software-based mechanisms: high frequency algorithmic trading) with real-time, co-located, high-frequency (sub-millisecond) trading platform—one (data collected then orders: created-routed-executed). Wall Street banks and hedge funds also use high-frequency techniques but new (ie emerged formed in c. 1999-2001) small (most have as few as 12 to 100 employees), independent firms account for most high-frequency trading, handling 60 % of the 7 B shares that change hands daily on US stock markets on Wall Street and hedge funds. These high-frequency trading firms have formed a trade group called Principal Traders Group in an effort to hold off regulators who want to curb their activities. The members of the FIA Principal Traders Group is the industry’s response to the Joint CFTC-SEC Advisory Committee examination of the market structure and policy issues arising from the extraordinary market turmoil that occurred on May 6, 2010. See (Bowley, Graham. 2011-07-18. “ Split-second traders aim to polish image.” New York Times.) High-frequency trading firms using high-frequency techniques (software-based mechanisms: high frequency algorithmic trading) earned $12.9 billion in profit in the last two years (2009-2011), according to TABB Group, a specialist on the markets. TABB Group content focused on the business and technology issues facing US equity and options trading.

RGM Advisors, is a high-frequency trading firm in Austin, Texas. RGM CEO Richard Gorelick, is leading his company to seek a higher public profile.

Low latency Algorithmic Trading is used to process market updates and turn around orders within milliseconds. Low latency trading refers to the network connections used by financial institutions to connect to stock exchanges and Electronic communication networks (ECNs) to execute financial transactions. With the spread of computerized trading, electronic trading now makes up 60% to 70% of the daily volume on the NYSE and algorithmic trading close to 35%. Trading using computers has developed to the point where millisecond improvements in network speeds offer a competitive advantage for financial institutions. (Low latency is also being discussed in the advertising community, as a form of advertising that responds rapidly to consumer inputs, often from tweets.)

International Energy Agency (IEA) The International Energy Agency (IEA) is an autonomous organisation which works to ensure reliable, affordable and clean energy for its 28 member countries and beyond. Founded in response to the 1973/4 oil crisis, the IEA’s initial role was to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets. It is at the heart of global dialogue on energy, providing authoritative and unbiased research, statistics, analysis and recommendations. The IEA is committed to keeping the oil supplies well-stocked. The Executive Director in 2011 is Nobuo Tanaka “Total oil stocks in IEA member countries amount to over 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes. IEA net oil-importing countries have a legal obligation to hold emergency oil reserves equivalent to at least 90 days of net oil imports. These countries are holding stock levels well above this minimum amount, currently at 146 days of net imports (http://www.iea.org)”

Henry C.K. Liu “is an independent commentator on culture, economics and politics. Born in Hong Kong and educated at Harvard University in architecture and urban design, Liu developed an interest in economics and international relations while pursuing interdisciplinary work on urban and regional development as a professor at UCLA, Harvard and Columbia universities. He was a planning/ development advisor to the late Winthrop Rockefeller, governor of Arkansas, and has received a national urban design award. Liu is currently the chairperson of a New York-based private investment group, a contributor to Asia Times Online and a visiting professor of global development at the University of Missouri at Kansas City. He is an occasional advisor on economic policy to several governments of emerging economies. Liu coined the term “dollar hegemony” to explain that the dollar, a fiat currency since 1971 and the major reserve currency internationally, distorts global trade and finance. Liu is a critic of central banking. He also calls for the use of sovereign credit in lieu of foreign capital for financing domestic development in developing countries. Liu has also been vocal in his critique of Chinese economic policy, which he argues includes imbalances that result in severe income disparity and environmental neglect. In a series of articles in Asia Times Online, Liu proposed the establishment of the Organization of Labor-Intensive Exporting Countries (OLEC), an international cartel, to restore the balance of market power between capital and labor in the globalized economy. He blogs at henryckliu.com. Huffington Post.”

Soft commodities:

OTC Over-the-counter derivatives markets engage in off-market trading for oil which is unregulated. Estimates for the OTC derivative market for all assets range upward of $600 trillion. See (Edison Electric Institute (EEI). 2010-01. “OTC Derivatives Reform: Energy Sector Impacts. p. 1.”). “Use of Financial Derivatives: A typical, large independent oil & natural gas exploration and production company regularly deals with volatility in oil & natural gas exploration. Such companies regularly make extensive use of financial derivatives with the discrete purpose of ensuring a stable cash flow from which they can consistently fund their capital program to find and bring much needed energy resources to market. Although they may make use of exchange-traded instruments, many of their financial transactions are concluded overthe-counter (OTC) under bilateral credit agreements. These frequently use the OTC markets for efficiency and economic reasons and allows the companies to: 1) customize the instrument specifically to operations;
2) reduce the need for cash by permitting more flexibility in the types of collateral leading to a more efficient use of capital and greater liquidity; 3) provide credit exposure diversification; and 4) have the ability to modify credit arrangements depending on a variety of factors during the term of a trade (more).”

Webliography and Bibliography

Bernstein, Jake. 2000. How the Futures Markets Work. New York Institute of Finance.

Although it is quite old for the fast-paced risk management industry, there are certain basics that ring true. He briefly traced the history futures contracts leading to the volatile environment where agricultural futures were replaced by the less predictable currency markets. Of course, his book was written long before the meteoric rise of private equity funds. My concern remains with the absent ethical component on trading floors. Ethical responsibilities are as elastic as the regulations that govern the centuries old practice of hedging. In the period of late capitalism and the emergence of risk society, the cost of destructive unintended byproducts have created havoc in ways that far exceed the commodities/service value. The road to profits and impatient money, is paved with casualties. Berstein’s facts of market life are telling. He encourages simple methods and systems which require few decisions and little mental conflict. Too much thought is not conducive to successful trading. Too much analysis costs lost opportunities. Keep systems simple. Control your emotions. Practice caring less so that you remain more objective. Don’t ask why. Knowing why may hinder you more than it will help you. Patterns are the best indicators available (What feeds into a “pattern” however is not a science). Timing is what makes money in the futures market (Bernstein 2000:282-3). In other words, futures’ gurus encourage young hedge fund analysts to not think too much about factors such as displacement of peoples, the degradation of living conditions and the way in which they unwittingly contribute to making vulnerable ecologies and peoples even more vulnerable. Their gurus tell them to not think about the impact of their actions. They are told to not ask why the prices of essential commodities like fuel and food that they are playing with, are pushing certain groups into unimaginable levels of social exclusion. In the end groups at-risk to health degradation are always those least able to protect themselves. How convenient that the gurus do not factor in these social issues. They are entirely absent from finance reports. But then a lot of information is purposely not included in financial and business reports. Bernstein argues that the simpler systems that take fewer things into consideration will lead to more profits. Yet when he lists off all the potential factors in operation in even a simple fundamental analysis, it is not at all simple. It begins with the highly complex. The algorithms involved may appear to be simplified through the use of databases that seem to generate accurate, objective hard facts. In reality, the accuracy of any query depends on what was fed into it.

April 13, 2011

Charles Taylor’s book entitled The Ethics of Authenticity was first published in Canada under the name “The Malaise of Modernity” which was broadcast in November 1991 on the CBC’s Ideas series. By 2003 it was in its 11th printing.

1. The first malaise concerns the dangers of individualism and the loss of meaning.

“. […] The worry has been repeatedly expressed that the individual lost something important along with the larger social and cosmic horizons of action. Some have written of this as the loss of a heroic dimension to life. People no longer have a sense of a higher purpose, of something worth dying for. Alex de Tocqueville [author of Democracy in America] sometimes talked like this in the last century, referring to the “petits et vulgaires plaisirs” [“petty and vulgar pleasures”] that people tend to seek in the democratic age. In another articulation, we suffer from a lack of passion. Kierkegaard saw “the present age” in these terms. And Nietzsche’s “last men” are at the final nadir of this decline; they have no aspiration left in life but to a “pitiable comfort.” This loss of purpose was linked to a narrowing. People lost the broader vision because they focused on their individual lives. Democratic equality, says Tocqueville, draws the individual towards himself, “et menace de le renfermer enfin tout entier dans la solitude de son propre coeur” [“and threatens finally to enclose him entirely within the solitude of his own heart”]. In other words, the dark side of individualism is a centring on the self, which both flattens and narrows our lives, makes them poorer in meaning, and less concerned with others or society (Taylor, Charles. 1991. “Taylor 1991:4 .”

2. The second malaise is the disenchantment of the world.

“Once society no longer has a sacred structure, once social arrangements and modes of action are no longer grounded in the order of things or the will of God, they are in a sense up for grabs. They can be redesigned with their consequences for the happiness and well-being of individuals as our goal. The yardstick that henceforth applies is that of instrumental reason Taylor 1991:5 .”

3. The third malaise concerns the atomism of the self-absorbed individual who is so “enclosed in their own hearts” and comfortable in their own homes that they no longer participate actively in self-government. This results in an “immense tutelary power” of a mild and paternalistic government, democratic in form with periodic elections but in reality a form of soft despotism as predicted by Tocqueville. (Tocqueville 1835) cited in Taylor 1991:9 .

“After having thus successively taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd. I have always thought that servitude of the regular, quiet, and gentle kind which I have just described might be combined more easily than is commonly believed with some of the outward forms of freedom, and that it might even establish itself under the wing of the sovereignty of the people. Our contemporaries are constantly excited by two conflicting passions: they want to be led, and they wish to remain free. As they cannot destroy either the one or the other of these contrary propensities, they strive to satisfy them both at once. They devise a sole, tutelary, and all-powerful form of government, but elected by the people. They combine the principle of centralization and that of popular sovereignty; this gives them a respite: they console themselves for being in tutelage by the reflection that they have chosen their own guardians. Every man allows himself to be put in leading-strings, because he sees that it is not a person or a class of persons, but the people at large who hold the end of his chain (de Tocqueville 1835.” Democracy in America).”

January 28, 2011

An article in (The Economist 2010-11-25) noted that Canada had survived the global financial crisis better than many other developed countries: Canadian banks and public finances are sound, and the economy recovered quickly and strongly from recession.” However, in the same article it was noted that “Canada ranks 22nd-worst out of the 31 countries in the OECD, in terms of child poverty. More than 3m Canadians (or one in ten) are poor; and 610,000 of them are children. (The Economist 2010-11-25).” This timeline of selected events related to child poverty in Canada attempts to trace the social history and compile reliable references on the successes and failures, progress and stagnation on the path to the eradication of child poverty in Canada.

Reverse chronological order

2012 The Innocenti Report uses Statistics Canada ‘s Survey on Labour and Income Dynamics (SLID), 2009 for the 2012 report.

“Survey on Labour and Income Dynamics (SLID) is a panel survey run by Statistics Canada. It is the country’s primary source for income data, and includes
information on family situation, education and demographic background. The survey is representative of all individuals living in Canada, excluding residents of
the Yukon, the Northwest Territories and Nunavut, as well as residents of institutions and persons living on Indian reserves. Overall, these exclusions amount to less
than 3% of Canada’s population. Report Card 10 uses data from the 2009 round of the SLID, with income poverty data referring to the year 2008. More information can be found at: http://www.statcan.gc.ca

2010-11 Canada survived the global financial crisis better than many other developed countries: Canadian banks and public finances are sound, and the economy recovered quickly and strongly from recession (The Economist 2010-11-25).”

2010-11 Canada ranks 22nd-worst out of the 31 countries in the OECD, in terms of child poverty. More than 3m Canadians (or one in ten) are poor; and 610,000 of them are children (The Economist 2010-11-25).

2010 British Columbia, one of the richest Canadian provinces has one of the highest rates of child poverty (10.4%) after taxes on family income.

2010 Some Canadian provincial governments, including those of populous Ontario and Quebec, have launched poverty-reduction programmes; many include attempts to prod or help people back into work (The Economist 2010-11-25).

2010 Newfoundland financed poverty eradication programs through its royalties from oil and mining and successfully has cut its poverty rate in half (to 6.5%) (The Economist 2010-11-25).

2010 The only strategy acceptable to Stephen Harper’s Conservative administration to respond to poverty is “the sustained employment of Canadians”. (The Economist 2010-11-25).

2009

2009-12 The Subcommittee on Cities, The Standing Senate Committee on Social Affairs, Science and Technology published a report entitled “In From the Margins: a Call to Action on Poverty, Housing and Homelessness.” described as “an excellent roadmap for poverty reduction.” One of the 72 recommendations towards the eradication of child poverty was to increase the National Child Benefit to reach $5,000 by 2012 [Recommendation 34].

“Through a myriad of expert witnesses, site visits, roundtables and most importantly, testimony from those living in poverty and homelessness, we are saddened to report that far too many Canadians living in cities live below any measure of the poverty line; that too many people struggle to find and maintain affordable housing; and that an increasing number of Canadians are homeless. And despite the thoughtful efforts and many promising practices of governments‘, the private sector, and community organizations, that are helping many Canadians, the system that is intended to lift people out of poverty is substantially broken, often entraps people in poverty, and needs an overhaul . . . [We] believe that eradicating poverty and homelessness is not only the humane and decent priority of a civilized democracy, but absolutely essential to a productive and expanding economy benefitting from the strengths and abilities of all its people. (Standing Senate Committee on Social Affairs, Science and Technology. 2009-12. “In From the Margins: a Call to Action on Poverty, Housing and Homelessness.” ).”

2009 According to the most recent data available in 2011, in Alberta there was a dramatic spike in child and family poverty. The “Alberta child poverty rate was 9.3% using LICO, compared to 12.8% using LIM. . . . (In This Together: Ending Poverty in Alberta.”

2009 “Disparities between families are growing. Between 1989 and 2009, after accounting for inflation, the yearly income of the poorest 10% of Alberta families with children increased by only $4,682. The yearly income of the richest 10% of families with children went
up $156,403. Average yearly family incomes went up $35,088 (In This Together: Ending Poverty in Alberta.”

2009 “In Alberta, the effectiveness of government income transfers in lifting children above the poverty line has increased over the years. In 1989, only about 25% of children were lifted above the poverty line. By 2009, this had increased to 44%. . . [However] In 2009, the Ontario government doubled the Ontario Child Benefit to $1100 per child, with a scheduled increase to $1310 by 2013.23 The Alberta government’s stronger financial position should allow it to introduce an Alberta Child Benefit at least equal to Ontario’s (In This Together: Ending Poverty in Alberta.”

2008

2008 When Canada entered the brutal recession there were c. 3 million Canadians living in poverty using the standard measure, Statistic Canada’s after-tax low-income cut-off (LICO) (Yalnizyan 2010-06-21).

2008 Witnesses at the senate inquiry on poverty, described challenges of raising children in poverty, and of increasing earnings in the labour market without affordable care for children that also contributes to their development and preparation for school (Yalnizian, Browne, Battle, Issue 4, 28 February 2008). The same witnesses emphasized that a small universal contribution to families with young children, like the current Universal Child Care benefit, was not sufficient to purchase childcare (GC 2008-06-08).

2007

2007 The child poverty rate in Canada was still 11.7%. Canada experienced a 50% real increase in the size of its economy from 1989 to 2007.

2007-06-14 Michèle Thibodeau-DeGuire, President and Executive Director, United Way of Greater Montreal, Evidence, SAST, 1st Session, 39th Parliament, 14 June 2007: “If people cannot have affordable housing, they will be in a horrible mess. Most of their money will go toward rent. They cannot feed themselves properly. How will they be able to help their children through school with the stress they live with?”

2007-11-26 Campaign 2000 released their national annual report card on poverty in Canada entitled “It Takes a Nation to Raise a Generation: 2007 Report Card on Child & Family Poverty in Canada.” Despite a growing economy, soaring dollar and low employment, 788,000 children (1/8 of Canadian children) live in poverty. Ontario remains the “child poverty capital,” with 345,000 children living in impoverished conditions.”

2007-11-26 Almost 30 per cent of Toronto families – approximately 93,000 households raising children – live in poverty, compared with 16 per cent in 1990. [The Mercer annual Cost of Living Survey of 143 major cities around the world measures the comparative cost of over 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. In 2006, Toronto was ranked as the most expensive city in Canada, just slightly ahead of Vancouver.] Since 2000, the city has seen a net loss of jobs, many of them well-paying and unionized, while elsewhere job creation is on the rise. At the same time jobs have been replaced by temporary, part-time and contract work that offer no job security, benefits or eligibility for employment insurance. As a result, an alarming number of households are in deep financial trouble as seen by an increase in the number of evictions, family debt and bankruptcies since 2000, a year when the crippling recession of the 1990s had clearly eased in the rest of the country, the report says. From 1999 to 2006, landlord applications for eviction due to nonpayment of rent climbed from 19,795 to more than 25,000. Also, the number of people receiving credit counselling in Toronto has almost doubled in the past six years to an average of 4,534 per month. Not surprisingly, the number of moneylending outlets has increased almost eightfold since 1995 to more than 300, largely concentrated in the low-income neighbourhoods. United Way of Greater Toronto. 2007. Losing Ground: The Persistent Growth of Family Poverty in Canada’s Largest City, (Monsebraaten and Daly 2007-11-26 ).

2007-05-09 The former Ontario premier Bob Rae was one of four panellists at at the Toronto Star-sponsored forum on the growing income gap held at the St. Lawrence Centre and attended by 250. Rae argued that, “We now have to restore and renew our commitment to help people in difficult times [to invest] in affordable housing, child care and education” [. . .] Rae noted that Canada is the only government in the Organization for Economic Co-operation and Development that doesn’t have a national housing policy, and that’s reflected in the country’s poverty figures. Economist Yalnizyan, research director of the Toronto Social Planning Council remarked that “Income inequality is the second inconvenient truth in our society. [G]overnments need to act now – not only to tackle poverty, but to ensure everyone is benefiting from a healthy economy (Monsebraaten and Daly 2007).” Stop picking away at the edges of poverty, say forum speakers, and take a leaf from Ireland’s comprehensive plan.

2007-05 A study by economist Yalnizyan was released by the Canadian Centre for Policy Alternatives, showing a widening income gap in Ontario. “40 per cent of Ontario families have seen no gain in real income – and often a loss – compared with their predecessors 30 years ago. The richest 10 per cent, meanwhile, have seen their incomes soar. And even though Ontario parents are better educated, they spend more time working than the previous generation did, the study says (Monsebraaten and Daly 2007).”

2007-04 Ontario’s provincial budget “put poverty reduction on the agenda with a new Ontario child benefit for all children in low-income families – not just those on welfare. And it outlined a plan for raising the minimum wage to $10.25 by 2010, from $8 today (Monsebraaten and Daly 2007).”

2007-03 The Ontario Child Benefit, announced in the March 2007 Ontario Budget, pledged $2.1 billion over the first five years to help low-income families support their children (UWGT 2007:73).

2007 The federal government introduced a non-refundable child tax credit which provides income tax savings of up to $300 for children of all ages to tax-paying parents (Senate of Canada 2008-06-08).

2007 In 2007 Report Card on Child Well-being in Rich Countries: The most comprehensive assessment to date of the lives and well-being of children and adolescents in the economically advanced nations. builds and expands upon the analyses of Report Card No. 6 which considered relative income poverty affecting children and policies to mitigate it. Report Card 7 provides a pioneering, comprehensive picture of child well being through the consideration of six dimensions: material well-being, health and safety, education, family and peer relationships, subjective well-being, behaviours and lifestyles informed by the Convention on the rights of the child and relevant academic literature.” UNICEF. 2007. “Report Card on Child Well-being in Rich Countries.”

2007-11-12 Ligaya, Armina. 2007. “The debate over Canada’s poverty line.” CBC News On-line. http://www.cbc.ca/news/background/economy/poverty-line.html November 12. “[C]hild poverty numbers have not budged at all since 1989 when Canadian parliamentarians stood up and promised to do their best to eradicate it within a decade. Even today, 11.7 per cent of children under 18 are living below the low-income cut-off line.” There are now record numbers of tenants being evicted from their homes and a rising dependency on food banks (Shapcott cited in Ligaya 2007).

2007 “Jean Swanson, co-ordinator of the Carnegie Centre Action project in the heart of Vancouver’s Downtown Eastside, said restricting access to employment insurance and welfare only punishes the poor. The poverty activist said she has watched Canada’s homeless epidemic multiply what she says is 10-fold over the last decade (Ligaya 2007).”

2006

2006 Newfoundland announced a strategy to become the province with the lowest poverty rate by 2016.

2006 20,900 Canadian children used food banks, double the number in 1989.

2006 The Universal Child Care Benefit (UCCB) was added, with payments of monthly instalments of $100 for every child under the age of 6 (regardless of parental income) (Senate of Canada 2008-06-08).

2006 The net worth of the lowest quintile fell to a negative net worth from zero while national net worth grew 2.8% in the last quarter of 2006. Less than 10% of families who hold at least 53% of total Cdn. net worth ($4.8 trillion) (Drummond and Tulk, 2006).

2006-11-24 CBC news summarized details from the Campaign 2000 (2006) National Annual Report on Child Poverty with the headlines “Aboriginal children are poorest in country: report: B.C. and Newfoundland have highest rates; Alberta and P.E.I. have lowest rates.” November 24, 2006. One aboriginal child in eight is disabled, double the rate of all children in Canada; Among First Nations children, 43 per cent lack basic dental care; Overcrowding among First Nations families is double the rate of that for all Canadian families; Mould contaminates almost half of all First Nations households; Almost half of aboriginal children under 15 years old residing in urban areas live with a single parent; Close to 100 First Nations communities must boil their water; Of all off-reserve aboriginal children, 40 per cent live in poverty.

2005

1999-2005 Considerable wealth was accumulated in Canada between 1999 and 2005. In 2005 net worth increased by 41.7% to nearly $1.5 trillion (US?). The most recent Statistics Canada report revealed today that the Canadian national net worth reached $4.8 trillion by the end of the third quarter. While in terms of an economist’s algorithm this translates into an average of $146,700 per person. In reality only the a tiny number of Canadian households benefited. “The gain in net worth resulted from an increase in national wealth (economy-wide non-financial assets) as well as a sharp drop in net foreign debt. National net worth grew 2.8% in the third quarter, the largest increase in more than two years (Statistics Canada 2006)”.

2005 According to Stats Canada the disparity between the top income-earning category and the lowest was $105,400 (Shapcott cited in Ligaya 2007). Statistics Canada income figures showed 788,000 children were living in poverty in 2005, a rate of 11.7 per cent.

2005 41 per cent of all low-income children lived in families in Canada where at least one parent had a full-time job (Campion-Smith 2007).

2004

2004 Childhood poverty in the United States is among the highest in the developed world (Rifkin ED 2004: x).”

2004 Since 2004, the 25 countries of the European Union (EU) have been developing a new statistical data source, known as Community Statistics on Income and Living Conditions (EU-SILC). EU-SILC aims to become the reference source of comparative statistics on income distribution and living conditions within the EU. A primary purpose of EU-SILC is to monitor the common indicators (the so-called Laeken Indicators) by which the EU has agreed to measure its progress towards reducing poverty and social exclusion. EU-SILC therefore replaces the European Community Household Panel (ECHP) which was the main source of such data from 1994 until 2001 (for the then 15 Member States of the EU). Designed to fill some of the acknowledged gaps and weaknesses of the ECHP, EU-SILC collects every year comparable and up-to-date cross-sectional data on income, poverty, social exclusion and other aspects of living conditions – as well as longitudinal data on income and on a limited set of non-monetary indicators of social exclusion. The first EU-SILC data for all 25 Member States of the current EU, plus Norway and Iceland, should be available by the end of 2006. The first 4-year longitudinal data on ‘those at-persistent-risk-of-poverty’ will be available by the beginning of 2010. In addition to populating these core indicators, each round of EU-SILC also gathers data on one particular theme – beginning in 2005 with data on the intergenerational transmission of poverty.

2002

2002 Quebec introduced anti-poverty legislation. The “Province of Quebec and Ireland have tackled poverty head on, with impressive results that show poverty reduction can be achieved against planned goals (UWGT 2007:73).”

2002 Of all the world’s wealthy nations it was only in the United States that the majority (58%) claimed that cared more about personal freedom to pursue goals without government interference than play an active role in society so as to guarantee that nobody is in need? (Rifkin ED 2004:379) .”

2001

2001 Over 653,000 Canadians were earning wages that classified them as “working poor” (and 1.5 million people were directly affected, one third of them children under the age of 18) (Senate of Canada 2008-06-08).

2001-05 The National Council on Welfare using the LICO claimed that 5 million Canadians are living in poverty.

2000s

2000-12 Laurel Rothman, the National Coordinator of Campaign 2000 wrote a Letter to the Editor entitled “Richer, poorer” to the National Post in response to their editorial dismissing Campaign 2000’s annual report card (Rothman 2000).

2000-12-06 A letter entitled “No surplus for kids” by Pedro Barata, the Ontario Coordinator of Campaign 2000, was published in the Toronto Star. Barata asked, “Why is it that Ontario was one of only two provinces where since 1996 poor families fell deeper below the poverty line?” or, “Why does Ontario have the highest monthly fees for child care in Canada?”

2000-06-01 Innocenti Report Card. Issue No. 1. The first Innocenti Report Card presents the most comprehensive analysis to date of child poverty in the nations of the Organisation for Economic Co-operation and Development (OECD). “Whether measured by relative or absolute poverty, the top six places in the child poverty league are occupied by the same six nations – all of which combine a high degree of economic development with a reasonable degree of equity” In the league table of relative child poverty, the bottom seven places are occupied by the Canada (15.5%), Ireland (16.8%), Turkey, United Kingdom, Italy, the United States (22.4%), and Mexico (26.2%). In the league table of absolute child poverty, the bottom four places are occupied by Spain, the Czech Republic, Hungary, and Poland.” “The countries with the lowest child poverty rates allocate the highest proportions of GNP to social expenditures (Figure 8). Differences in tax and social expenditure policies mean that some nations reduce ‘market child poverty’ by as much as 20 percentage points and others by as little as 5 percentage points (Figure 9).”

2000-12-05 The editorial in the Toronto Star dealt with child poverty in Canada.

2000-11-24 The National Post published an editorial dismissing Campaign 2000’s Annual National Report Card on Child Poverty in Canada (Rothman 2000).

2000 Almost 1 in 5 children still living in poverty in Ontario.

2000 “In the absence of an official poverty line in Canada, Campaign 2000 ascribes to the position held by most Canadian social policy organizations studying the issue and by UNICEF. UNICEF uses a relative measure of poverty to describe those whose material, cultural and social resources are so limited as to exclude them from the minimum acceptable way of life where they live (Rothman 2000).”

2000 Table 1. shows the percentage of children living in ‘relative’ poverty, defined as households with income below 50 per cent of the national median. Using this standard of relative poverty countries at the bottom of the list included Canada (15.5%), Ireland (16.8%), Turkey, UK, Italy, USA (22.4), Mexico (26.2%), . Innocenti Report Card. Issue No. 1. (UNICEF 2000)

1990s

1990s “The recession of the 1990s generated a much bigger escalation of poverty [than the 1980s], both in magnitude and duration, because a protracted period of job loss ran into the scaling back of unemployment insurance and social assistance by federal and provincial governments [tough-love approaches] (Yalnizyan 2010-06-21).”

1990s “The growth in the number of low-income families in the City of Toronto in the 1990s was alarming, soaring from 41,670 at the start of the 1990s to 84,750 by the decade’s end. The factors that contributed to this change are well known – the deep recession in the early 1990s, corporate downsizing, the rise in precarious employment, decreased access to Employment Insurance, reduced welfare payments, and the barriers that skilled immigrants faced finding work for which they were qualified (UWGT 2007:40).”

1998 The National Child Benefit Supplement was added to the CCTB to provide increased benefits to all low-income families including those without taxable income.

1997 Senator Ermine Cohen wrote a report on child poverty in Canada, entitled “Sounding the Alarm: Poverty in Canada.”8 “It was intended to ―revisit the commitments made in the 1971 Croll Report and to evaluate progress a quarter-century later. Her report provided useful snapshots of poverty experienced by those who were working and those who were not, among over-represented groups including Aboriginal peoples, people with disabilities, youth and seniors. She considered the role of the labour market, our international obligations, and more themes that emerged again in our study. Harshly critical of our ―tax and transfer‖ system, the report called for changes, as did the Croll report before it. Too few have been implemented SSCSAST 2009-12. p. 24).”

1996 The number of Canadians living under the low-income cut-off after taxes was 11.6 per cent in 1980, according to Statistics Canada, far lower than the 1996 peak of 15.7 per cent (Yalnizyan cited in Ligaya 2007).

1995-2005 The national Irish government set firm targets, created timetables and reported annually so the public could easily see progress being made against poverty. In this way they reduced poverty from 15 per cent to 6.8 per cent (Yalnizyan in Monsebraaten and Daly 2007).

1995 The World Summit for Social Development was held in Copenhagen. The Copenhagen Declaration and Programme of Action was adopted. The Copenhagen stressed the urgent need for countries to deal with social problems such as poverty, unemployment and social exclusion (Symonides 1998). This was the largest gathering ever of world leaders. The declarations, programmes included a pledge to put people at the centre of development, to conquer poverty, to ensure full employment, to foster social integration (Development 1995).

1992 United Nations Conference on Environment and Development was held in Rio de Janeiro. “At this conference it was recognized that extreme poverty and social exclusion of vulnerable groups persisted and inequalities had become increasingly dramatic in spite of economic development. At this conference the term sustainable development referred to “economic development, social development and environmental protection as interdependent and mutually reinforcing components (Symonides 1998:3).”

1991 Canada experienced a transformational recession for the labour market and began emerging from that only in 1997 (Yalnizyan cited in Ligaya 2007).

1980s

1989-11-24 The child poverty rate in Canada was 11.7%. On November 24, 1989, the House of Commons unanimously passed a resolution to seek to achieve “the goal of eliminating poverty among Canadian children by the year 2000 (Campaign 2000 ).”

1989 The Canadian Parliament unanimously supported a resolution to eliminate child poverty by 2000.

1988 The UNICEF Innocenti Research Centre, located in Florence, Italy, was established in 1988 to strengthen the research capability of the United Nations Children’s Fund and to amplify its voice as an advocate for children worldwide.

1980s and 1990s Single mothers, disabled people, aboriginal Canadians and immigrants suffered cuts in welfare payments (which are too meagre to keep someone above the country’s de facto poverty line) when governments, both federal and provincial, cut public spending to restore fiscal health (The Economist 2010-11-25).

1981-82 Canada experienced a transformational recession for the labour market and it took the country about eight years to climb out of the rut (Yalnizyan cited in Ligaya 2007).

1980 The number of Canadians living under the low-income cut-off after taxes was 11.6 per cent in 1980, according to Statistics Canada, far lower than the 1996 peak of 15.7 per cent (Yalnizyan cited in Ligaya 2007). “In 1980, the disparity between the top income-earning category and the lowest was $83,000, according to Statistics Canada. By 2005, that gap had reached $105,400 (Shapcott cited in Ligaya 2007).”

1970s

1971Senator David Arnold Croll, PC, QC published his influential “Report of the Special Senate Committee on Poverty” (Croll Report) which began with the words “the poor do not choose poverty. It is at once their affliction and our national shame. The children of the poor (and there are many) are the most helpless victims of all, and find even less hope in a society where welfare systems from the very beginning destroys their chances of a better life.” The report moved the Trudeau government to triple family allowances in 1973 and institute the Child Tax Credit in 1978. Aside from his work on poverty, he was also responsible for Senate reports on aging. In 1990 in recognition of his contributions, he was sworn into the Queen’s Privy Council for Canada, an honour usually given only to federal cabinet ministers.

1950s

1950 [In 2000] despite a doubling and redoubling of national incomes in most nations since 1950, a significant percentage of their children are still living in families so materially poor that normal health and growth are at risk. And as the tables show, a far larger proportion remain in the twilight world of relative poverty; their physical needs may be minimally catered for, but they are painfully excluded from the activities and advantages that are considered normal by their peers (UNICEF. 2001. Innocenti Report Card. Issue No. 1.).”

Note: In 2011 Canada still does not have an official poverty line although most data on poverty is presented using the uniquely Canadian Low Income Cut-off (LICO) After-Tax Measure, which is based on a complex calculation.1. The major weakness of LICO as a measurement tool is partly that since 1992, LICO has only been updated for inflation and not other changes in the expenditure pattern of Canadian families. Statistics Canada has no plans to update LICO (In This Together: Ending Poverty in Alberta. Campaign 2000 is considering transitioning from LICO to the Low Income Measure (LIM) (After-Tax) starting in 2012. LIM, is based on 50% of median family income, is a more easily understood measure. LIM is updated every year. LIM is used internationally while LICO is only used in Canada. As shown on Chart 1, in their report, “in the 1990s LICO poverty rates were higher than LIM rates. In the 2000s LICO rates have been consistently lower. In 2009, the Alberta child poverty rate was 9.3% using LICO, compared to 12.8% using LIM (In This Together: Ending Poverty in Alberta.”

February 2, 2010

In the 199os an artist-musician and close friend originally from Haiti, Emmanuel Printemps, used to visit us regularly on Friday evenings and we would ask him to share his music with us and our other guests. We always requested one of his most moving, enchanting Creole songs, the powerful but sad story of the local butcher who lost his livelihood during the pig slaughter. As I follow the events in Haiti since the earthquake, I think of these precious friends from another time and place; they and their families are in our hearts and prayers.

Rural peasants in Haiti raised a very hardy breed of creole pigs which along with goats, chickens, and cattle served as a savings account. It was argued that from 1978 to 1982 about 1/3 of Haiti’s pigs became infected with the highly contagious African Swine Fever (ASF) in an epidemic that had spread along the Artibonite River shared with the Dominican Republic whose pigs had caught the virus from European sources. At first peasants were encouraged to slaughter their own pigs but then the Haitian government proceeded on a total eradication program that virtually wiped out what remained of the 1.2-million pig population by 1982. Farmers argued that they were not adequately compensated for their losses. The more robust creole pigs were replaced with a sentinel breed of U. S. pigs that were not adapted to Haiti’s ecosystem or market. For Haiti’s rural peasants the loss of income due to the virus and the government’s controversial eradication and repopulation programs led to further impoverishment and greater hardship, ultimately resulting in greater political instability.

View

In two webviral posts entitled “The Hate and the Quake: Rebuilding Haiti” by scholar, historian Sir Hilary Beckles of the University of the West Indies, (Beckles 2010-01-19) that are now circling the globe , we need to do some memory work before we conclude that Haitians are the architects of their own impoverishment.

In this seminal retelling of Haiti’s history, (Beckles 2010-01-19) reminds us all that when Haiti provided freedom and the right of citizenship to any person of African descent who arrived on the shores of the newly formed Haitian republic (1805), the newly formed nation-state (1804) was strategically punished by Western countries, through economic isolation ( (Beckles 2010-01-19)).

From 1805 through 1825 Haiti was completely denied access to world trade, finance, and institutional development in “the most vicious example of national strangulation recorded in modern history ( (Beckles 2010-01-19)).”

In 1825 in an attempt to be a part of international markets, Haiti entered into negotiations with France which resulted in payment of a reparation fee of 150 million gold francs to be paid to France in return for national recognition. The installments were made from 1825 until 1922. From 1825-1900 alone this amounted to 70% of Haiti’s foreign exchange earnings. Beckles (2010-01-) argues that this merciless exploitation caused the Haitian economy to collapse (Beckles 2010-01-19).

Furthermore, when Haiti’s coffee or sugar yields declined, the Haitian government had to borrow money from the United States at double the going interest rate in order to repay their punishing debt to the French government (Beckles 2010-01-19) .

From 1915-1934 the United States occupied Haiti under orders of President Woodrow Wilson in response to concerns that Haiti was unable to make its considerable loan payments to American banks to which Haiti was deeply in debt. The brutal U.S. occupation of Haiti caused problems that lasted long after 1934.

August 26, 2009

The concept of hyphen-ethics is most relevant in the field of bioethics where health care issues are inextricably linked with the market and the perceived needs of the health industry (medical professionals, pharmaceutical companies, fund-raising organizations such as cancer research fund-raisers) to enjoy economic health. It is not just about caring for the human need for well-being or even a freedom from suffering although this is the subject of current debates on universal health care. Who will decide what is a human need and what is a want in terms of defining basic, adequate, essential and/or discretional health care access. When and where do health resources end? What are the ends of medicine? What is the nature of medicine? What are the limits to imposed regulations and health care?

The calm witness in the debate on universal health care, a man married to a long-term cancer survivor, is concerned that proposed federal regulations, would deprive him of the current level of health care services his family needs. In a closer reading of his family’s story, his wife’s free access to a $60,000 treatment was through an act of philanthropy on the part of the treatment providers. Would this be affected by providing access to others who are lacking insurance or who have inadequate insurance? Her other medical bills were paid through his work plan. But what if he, like so many others today, suddenly no longer had an employer who provided a health plan? Perhaps what he is really expressing is gratitude for what he was able to receive and hope that others will be as fortunate when faced with a family health crisis.

In 1981 philosopher Amy Gutmann published an article entitled, “For and Against Equal Access to Health Care” in the Milbank Memorial Fund Quarterly. When the article was reprinted in 1999, the editors described how, “The Gutmann piece was written long before the failure of the Clinton plan but it still remains a classic argument for a national or universal health care system. A principal feature of her argument is that a one-class health care system, one for the rich, the middle classes and poor alike, promotes a health care system that caters to the needs of the better off as well as the poor, and this will strengthen the overall system level of benefits. Gutmann for practical political reasons acknowledges that a one-class system could not go so far as to forbid the rich from purchasing more health care outside the system, spending out of-pocket (Beauchamp; Steinbock 1999:253).”

“I suspect that no philosophical argument can provide us with a cogent principle by which we can draw a line within the enormous group of goods that can improve health or extend life prospects of individuals . . . The remaining question of establishing a precise level of priorities among health care and other goods is appropriately left to democratic decision-making (Gutmann 1981: 542-60)

Because of his close advisory position with President Obama on health care issues, Ezekiel J. Emanuel’s opinions are being scrutinized. In his article (1996-11/12) entitled “Where Civic Republicanism and Deliberative Democracy Meet,” seems to misinterpret Gutmann’s arguments as extremely dangerous moral skepticism. Emanuel assumed that she concluded, that there can be no principled mechanism to define basic health care services and, therefore, that the efforts to ensure universal access will always founder on the fear that guaranteeing any health care to all citizens means guaranteeing all available services. It suggests we should just give up on a just allocation of health care resources because we can never succeed (Emanuel 1996:13).” Emanuel misread her carefully worded debate in which she succinctly summarizes various perspectives on access to health care in the pre-Clinton health care debate period. In one scenario she traces the unintended consequences of imposed universal access in an imperfect world and goes on to suggest a pragmatic solution. In fact Gutmann concludes, “I began by arguing that a principle of equal access to health care was at best an ideal toward which our society might strive. I shall end by qualifying that statement. A sufficiently high level of public provision of health care for all citizens and a sufficiently elastic supply of health care would significantly reduce the threat to universal provision of quality health care of a private market in extra health care goods, just as a very high level of police protection and education reduces the inequalities of opportunity resulting from purchase of private bodyguards or of private school education by the rich. In the best of all imaginable worlds of egalitarian justice, the equal access principle would be sufficiently supported by other egalitarian social and economic institutions that a market in health care would complement rather than undercut the goals of equal respect and opportunity. But philosophers ought to resist basing their political recommendations solely upon a model of the best of all imaginable worlds (Gutmann 1999 [1981:253]).”

suggests that, “Regardless, a refined view has emerged that begins to overlap between liberalism and communitarianism. This overlap inspires hope for making progress on the just allocation of health care resources. This refined view distinguishes issues within the political sphere into four types: (1) issues related to constitutional rights and liberties; (2) issues related to opportunities, including health care and education; (3) issues related to the distribution of wealth such as tax policies; and (4) other political matters that may not be matters of justice but are matters of common good, such as environmental policies and defense politicies. While there still may be disagreement about the need for a neutral justification for rights and liberties, there is consensus between communitarians and liberals that policies regarding opportunities, wealth, and matters of the common good can only be justified by appeal to a particular conception of the good. As Rawls has put it:

Public reason does not apply to all political questions but only to those involving what we may call “constitutional essentials.”3 (Emanuel 1996:13).”

TBC

1960s the dominant social issue of the 1960s and 1970s was that of justice and equality. Given that context, it was hardly surprising that the field of bioethics saw a great surge of writing and debate on issues of justice and health care.(Daniels, Emanuel and Jennings 1996).

1970s the dominant social issue of the 1960s and 1970s was that of justice and equality. Given that context, it was hardly surprising that the field of bioethics saw a great surge of writing and debate on issues of justice and health care.(Daniels, Emanuel and Jennings 1996).

1972 John Rawls’ 1972 study A Theory of Justice “was not only a powerful work in its own right but perfectly in step with the times. Given that context, it was hardly surprising that the field of bioethics saw a great surge of writing and debate on issues of justice and health care. That was, and still is, a central topic. Far less important for many years was any serious discussion of the ends of medicine. To be sure, there was and is a field known as the philosophy of medicine that has given considerable attention to the nature of medicine. But the discussion in that field – which was often technical and historical in any case, self-consciously academic and scholarly – proceeded independently of the interest in health care equality. And vice-versa. In retrospect, that seems an odd bifurcation. How is it possible to have a full examination of a field as dynamic and fast-changing as health care without – simultaneous – asking some basic questions about what health care is supposed to give us and do for us? Norman Daniels, in his fine work on justice and health care, has come as close as anyone to attempting to find the specific link between the ends of health care and fair access to it. By his use of the concept of species-typical functioning as the goal of medicine he has sought to (Daniels, Emanuel and Jennings 1996).

1981 Philosopher Amy Gutmann published an article entitled, “For and Against Equal Access to Health Care” in the Milbank Memorial Fund Quarterly. “The Gutmann piece was written long before the failure of the Clinton plan but it still remains a classic argument for a national or universal health care system. A principal feature of her argument is that a one-class health care system, one for the rich, the middle classes and poor alike, promotes a health care system that caters to the needs of the better off as well as the poor, and this will strengthen the overall system level of benefits. Gutmann for practical political reasons acknowledges that a one-class system could not go so far as to forbid the rich from purchasing more health care outside the system, spending out of-pocket (Beauchamp; Steinbock 1999:253).”

“I suspect that no philosophical argument can provide us with a cogent principle by which we can draw a line within the enormous group of goods that can improve health or extend life prospects of individuals . . . The remaining question of establishing a precise level of priorities among health care and other goods is appropriately left to democratic decision-making (Gutmann 1981: 542-60)

1996 Norman Daniels, Ezekiel J. Emanuel and Bruce Jennings co-authored the Hastings Center Report entitled “Is Justice Enough? Ends and Means in Bioethics. “There call be little doubt that the dominant social issue of the 1960s and 1970s was that of justice and equality. It inspired the development of many fresh welfare policies and was a potent motivating force in the advent of Medicare and Medicaid, both thought (mistakenly as it turned out) to be the forerunners of universal health care. John Rawls’ 1972 study A Theory of Justice was not only a powerful work in its own right but perfectly in step with the times. Given that context, it was hardly surprising that the field of bioethics saw a great surge of writing and debate on issues of justice and health care. That was, and still is, a central topic. Far less important for many years was any serious discussion of the ends of medicine. To be sure, there was and is a field known as the philosophy of medicine that has given considerable attention to the nature of medicine. But the discussion in that field – which was often technical and historical in any case, self-consciously academic and scholarly – proceeded independently of the interest in health care equality. And vice-versa. In retrospect, that seems an odd bifurcation. How is it possible to have a full examination of a field as dynamic and fast-changing as health care without – simultaneous – asking some basic questions about what health care is supposed to give us and do for us? Norman Daniels, in his fine work on justice and health care, has come as close as anyone to attempting to find the specific link between the ends of health care and fair access to it. By his use of the concept of species-typical functioning as the goal of medicine he has sought to (Daniels, Emanuel and Jennings 1996).

1996-11/12 Ezekiel J. Emanuel’s article entitled “Where Civic Republicanism and Deliberative Democracy Meet,” cautioned that Gutmann and Daniels’ moral skepticism was extremely dangerous. [I]t suggests that there can be no principled mechanism to define basic health care services and, therefore, that the efforts to ensure universal access will always founder on the fear that guaranteeing any health care to all citizens means guaranteeing all available services. It suggests we should just give up on a just allocation of health care resources because we can never succeed (Emanuel 1996:13).”

1999 “Most books about ethics and health focus on issues arising from individual patients and their relationships with doctors and other health professionals. More and more, however, ethical issues are challenges that face entire communities, not just individual patients. This book is an edited collection of readings that addresses these public health challenges. Many of the issues considered, such as policy for alcohol and other drugs, newly emergent epidemics, and violence prevention, are public health concerns beyond the purview of traditional bioethics. Others, such as access to health care, managed care, reproductive technologies, and genetic testing, are covered in bioethics texts, but here they are approached from the distinct viewpoint of public health. The book makes explicit the community perspective of public health, as well as the field’s emphasis on prevention. It examines the conceptual issues raised by the public health perspective (i.e., what is meant by community, the common good, and individual autonomy) as well as the policies that can be developed when health problems are approached in population-based, preventive terms.” Amazon abstract of: Beauchamp, Dan E.; Steinbock, Bonnie. 1999. New Ethics for the Public’s Health. Oxford University Press. This book includes the

Limited preview – 1999 – 382 pages

2001 In his controversial article entitled “Terminating Life-Sustaining Treatment of the Demented,” Dan Callahan (Callahan 2001:93) claimed that euthanasia is necessary for patients suffering from terminal illness. Opponents claim that euthanasia is immoral and violates reason.

2009-07-17 Senator Edward Kennedy (1932-2009): “We will end the disgrace of America as the only major industrialized nation in the world that doesn’t guarantee health care for all of its people (Kennedy Newsweek).”

“Is there a relationship between defects in our medical ethics and the reason the United States has repeatedly failed to enact universal health coverage? I will begin to suggest an answer to this question by clarifying the locus of allocating decisions. The allocation of health care resources can occur on three levels. The social or, in the economist’s language, the macro level entails the proportion of the gross national product (GNP) allocated to health care. The patient, or micro, level entails determining which individual patients will receive specific medical services; that is, whether Mrs. White should receive this available liver for transplantation. Finally, there is an intermediate level called the service or medical level that entails determining what health care services will be guaranteed to each citizen. These socially guaranteed services have been called “basic” or “essential” medical services or what the President’s Commission designated as “adequate health care.” Clearly, these three levels are connected. A larger proportion of the GNP going to health permits coverage of more services. Similarly, as demonstrated by the end-stage renal disease program, providing specific services to a wider range of patients causes upward pressure on the proportion of the GNP going to health care and/or reduces the range of services covered as part of basic medical services. Despite these connections, these three levels are conceptually distinct.(Emanuel 1996:12)”

“The fundamental challenge to theories of distributive justice for health care is to develop a principled mechanism for defining what fragment of the vast universe of technically available, effective medical care services is basic and will be guaranteed socially and what services are discretionary and will not be guaranteed socially. Such an approach accepts a two-tiered health system- some citizens will receive only basic services while others will receive both basic and discretionary health services. Within the discretionary tier, some citizens will receive few discretionary services, and other richer citizens will receive almost all available services, creating a multiple-tiered system (Emanuel 1996:12).”

“Underlying the repeated failure of attempts to provide universal health care coverage in the United States is the failure to develop a principled mechanism for characterizing basic health services. Americans fear that is society guarantees certain services as “basic,” the range of services guaranteed will expand to include all-or almost all- available services (except for cosmetic surgery and therapies that have not been proven effective or proven ineffective). So rather than risk the bankruptcy of having nearly every medical service socially guaranteed to all citizens, Americans have been willing to tolerate a system in which the well insured receive a wide range of medical services with some apparently basic services uncovered; Medicare beneficiaries receive fewer services with some discretionary services covered and some services that intuitively seem basic uncovered; Medicaid beneficiaries and uninsured persons receive far fewer services (Emanuel 1996:12).”

“On this view, the reason the United States has failed to enact universal health coverage is not primarily political or economic; the real reason is ethical- it is a failure to provide a philosophically defensible and practical mechanism to distinguish basic from discretionary health care services. What is the reason for this failure of medical ethics?(Emanuel 1996:12).”

“There are two opposing explanations. One explanation points to the inherent limits of ethics. Some philosophers, such as Amy Gutmann and Norman Daniels, argue that we lack sufficiently detailed ethical intuitions and principles to establish priorities among the vast array of health care services. Every time we try to define basic services our intuition “runs out.” As Gutmann once wrote:

I suspect that no philosophical argument can provide us with a cogent principle by which we can draw a line within the enormous group of goods that can improve health or extend life prospects of individuals . . . The remaining question of establishing a precise level of priorities among health care and other goods is appropriately left to democratic decision-making1

“Taken at face value, this moral skepticism is extremely dangerous; it suggests that there can be no principled mechanism to define basic health care services and, therefore, that the efforts to ensure universal access will always founder on the fear that guaranteeing any health care to all citizens means guaranteeing all available services. It suggests we should just give up on a just allocation of health care resources because we can never succeed (Emanuel 1996:13).”

“The second explanation holds the problem with definining basic health care services is not a general lapse of ethics, but a specific lapse of liberal political philosophy that informs our political discourse, including the allocation of health care resources. The problem is that priorities among health care services can be established only by invoking a conception of the good, but this is not possible within the framework of liberal political philosophy. Liberalism divides moral issues into three spheres: the political, social, and domestic. It then holds that within the political sphere, laws and policies cannot be justified by appeals to the good. To jusify laws by appealing to the good would violate the principle of neutrality and be coercive, imposing one conception of the good on citizens who do not necessarily affirm that conception of the good. But without appealing to a conception of the good, it is argued, we can never establish priorites among health care services and define basic medical services. This is Dan Callahan’s view with which I agree:2

. . . there can be no full discussion of equality in health care without an equally full discussion on the substantive goods and goals that medicine and health care should pursue . . . [U]nless there can be a discussion of the goals of medicine in the future as rich as that of justice and health has been, the latter problem will simply not admit of any meaningful solution (Emanuel 1996:13).”

“Fortunately, many including many liberals, have come to view as mistaken a liberalism with such a strong principle of neutrality and avoidance of the public good. Some think the change a result of the critique provided by communitarianism; others see it as a clarification of basic liberal philosophy. Regardless, a refined view has emerged that begins to overlap between liberalism and communitarianism. This overlap inspires hope for making progress on the just allocation of health care resources. This refined view distinguishes issues within the political sphere into four types: (1) issues related to constitutional rights and liberties; (2) issues related to opportunities, including health care and education; (3) issues related to the distribution of wealth such as tax policies; and (4) other political matters that may not be matters of justice but are matters of common good, such as environmental policies and defense politicies. While there still may be disagreement about the need for a neutral justification for rights and liberties, there is consensus between communitarians and liberals that policies regarding opportunities, wealth, and matters of the common good can only be justified by appeal to a particular conception of the good. As Rawls has put it:

Public reason does not apply to all political questions but only to those involving what we may call “constitutional essentials.”3 (Emanuel 1996:13).”

More expansively, Brian Barry has written:

Examples of issues that fall outside [the principle of neutrality include] two distinct kinds of items. One set of items (tax and property laws) contains matters that are in principle within the realm of “justice as fairness” but are subject to reasonable disagreement about the implications of justice . . . The other set . . . contains issues that in the nature of the case cannot be resolved without giving priority to one conception of the good over others . . . There is no room for a complaint of discrimination simply on the ground that the policy by its nature suits those with one conception of the good more than it suits those with some different one. This is unavoidable.4 (Emanuel 1996:13).”

“Thus it seems there is a growing agreement between liberals, communitarians, and others that many political matters, including matters of justice- and specifically, the just allocation of health care resources- can be addressed only by invoking a particular conception of the good (Emanuel 1996:13).”

“We may go even further. Without overstating it (and without fully defending it) not only is there a consensus about the need for a conception of the good, there may even be a consensus about the particular conception of the good that should inform policies on these nonconstitutional political issues. Communitarians endorse civic republicanism and a growing number of liberals endorse some version of deliberate democracy. Both envision a need for citizens who are independent and responsible and for public forums that present citizens with opportunities to enter into public deliberations on social policies (Emanuel 1996:13).”

“This civic republican deliberative democratic conception of the good provides both procedural and substantive insights for developing a just allocation of health care resources. Procedurally, it suggests the need for public forums to deliberate about which health services should be considered basic and should be socially guaranteed. Substantively, it suggests services that promote the continuation of the polity- those that ensure healthy future generations, ensure development of practical reasoning skills, and ensure full and active participation by citizens in public deliberations- are to be socially guaranteed as basic. Conversely, servuces provided to individuals who are irreversibly prevented from being or becoming participating citizens are not basic and should not be guaranteed. An obvious example is not guaranteeing health services to patients with dementia [13] [In his controversial article entitled “Terminating Life-Sustaining Treatment of the Demented,” Dan Callahan (Callahan 2001:93) claimed that euthanasia is necessary for patients suffering from terminal illness. Opponents claim that euthanasia is immoral and violates reason]. A less obvious example is guaranteeing neuropyschological services to ensure children with learning disabilities can read and learn to reason (Emanuel 1996:14).”

“Clearly, more needs to be done to elucidate what specific health care services are basic; however, the overlap between liberalism and communitarianism points to a way of introducing the good back into medical ethics and devising a principled way of distinguishing basic from discretionary health care services. Perhaps using this progress in political philosophy we can address Dan’s challenge, begin to discuss the goods and goals of medicine (Emanuel 1996:14).”